Central bank governor stresses the historical origin of existing RMB rate policies

16:48, April 08, 2010      

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The existing RMB exchange rate policy has its own historical origin, said Zhou Xiaochuan, governor of the People's Bank of China in a speech at Tsinghua University on April 7. He added that small open economies and large economies should adopt different exchange rate policies,

Zhou explained that small open economies and large closed economies should adopt different exchange rate policies because certain variables are endogenous for large economies, but exogenous for small economies. Therefore, we should comprehensively study domestic and international situations.

Zhou further explained that China had established its existing exchange rate policy by learning from history, and the existing policy took shape during China's transition from a planned economic system to a market economic system. Second, changes in the exchange rate policies worldwide also have effects on China's exchange rate policy.

The RMB exchange rate has become the focus of China-U.S. relations recently. The United States has never stopped imposing RMB appreciation pressure on the Chinese government despite the fact it has softened its stance towards China's exchange rate policy. On April 7, the Organization for Economic Cooperation and Development said in its latest report that China should allow its currency to appreciate.

The World Bank also pointed out in a report released April 7 that under the double pressure of the rise in asset prices and continued economic expansion, China's inflation-adjusted RMB exchange rate is likely to appreciate.

Incumbent and former U.S. Treasury Secretaries visit China

It is worth noting that both the incumbent U.S. Treasury Secretary and his predecessor are paying visits to Beijing.

Timothy Geithner, the U.S. Treasury Secretary, who has just completed a visit to India, will meet with Chinese vice Premier Wang Qishan in Beijing on April 8.

Geithner visited India from April 5 to April 7 before his visit to Beijing. Geithner said during a speech in India that the RMB should take on a broader role internationally, which will be "a healthy, necessary adjustment." The media has analyzed that one of the purposes of Geithner's visit was to encourage India to support the U.S. position.

On April 7, Chinese Premier Wen Jiabao met with former U.S. Treasury Secretary Henry Paulson, who is visiting China to attend the Boao Forum for Asia annual conference 2010 as a director of the forum. Earlier, Wang Qishan met with Paulson in Beijing on April 6.

By People's Daily Online


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